China Seeks $40 Billion to Drive Chipmaking; Country Garden dodges default by making last minute debt payments

Kim and Putin planning talks on potential arms deal, U.S. officials say; Foreign investors just aren't sold on India; Two arrested after digging hole through Great Wall of China

Welcome to this issue of The China Brief. Today is September 5, 2023. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.

China Seeks $40 Billion to Drive Chipmaking, Reuters Says

Bloomberg

China is reportedly looking to raise a $40bn fund to support investments in domestic chipmaking and research. The China Integrated Circuit Industry Investment Fund, also known as the Big Fund, is said to be establishing its largest investment pool to date. The fund has previously backed major Chinese chip enterprises, including Semiconductor Manufacturing International Corp and Yangtze Memory Technologies. The move is part of China's efforts to build a self-sufficient chip sector and reduce its reliance on US technology. However, it remains uncertain how Chinese players can navigate strict US restrictions on the sector.

China slowdown means it may never overtake U.S. economy: forecast

Japan Times

China may never surpass the US as the world's largest economy, says Bloomberg Economics, which projects it will take until the mid-2040s for China's GDP to exceed that of the US, and even then, by only a small margin. The economists said China's post-Covid rebound had run out of steam due to a deepening property slump and fading confidence in Beijing's management of the economy.

Asset managers look to sell Hong Kong buildings as higher rates bite

Reuters

Asset managers in Hong Kong are looking to sell their commercial buildings as rising interest rates are affecting mortgage payments. Some asset managers are also looking to sell as mortgage loans are due to be refinanced, which is more difficult when equity in the asset drops. The recovery in Hong Kong's commercial property sales and rental markets has been weaker than expected due to rising interest rates and a sluggish global and China economy. Office prices have dropped over 30% since their peak in 2019, with average rents also dropping 34% and vacancy rates rising to 17.3%.

The Malaysian scandal that rocked Wall Street and Hollywood

Guardian

"Man on the Run" is an investigative documentary film by Cassius Michael Kim that explores the 1MDB scandal, in which former Malaysian Prime Minister Najib Razak and businessman Jho Low are accused of embezzling millions of dollars from the sovereign wealth fund. The film also delves into the role of various financial institutions, including Goldman Sachs, Coutts, Royal Bank of Scotland, and UBS, and highlights the involvement of celebrities such as Leonardo DiCaprio, Paris Hilton, and Jamie Foxx, who were paid to party with Jho Low. Despite the lack of cooperation from celebrities, Kim managed to secure an interview with Najib before his conviction. The film provides a comprehensive overview of the scandal, with onscreen text providing additional information. However, the use of caricatures is criticized for lowering the film's tone.

Huawei’s Marquee Phone Launch Spurs Hunt for China Tech Winners

Bloomberg

The release of Huawei's new phone, which uses chips from Semiconductor Manufacturing International Corp (SMIC), has sparked a surge in the stock value of SMIC as well as other companies with business links to Huawei. Investors are optimistic about China's chip industry and see the Mate 60 Pro as a symbol of progress in developing a domestic chipmaking ecosystem. However, the rally in these stocks may be risky due to a lack of detailed information about Huawei's chip and the viability of producing it in large volume and at a reasonable cost.

China-Italy belt and road ties have borne fruit, Wang Yi tells Italian FM

South China Morning Post

Chinese Foreign Minister Wang Yi has emphasized the historic relationship between China and Italy amid speculation that Rome may withdraw from the Belt and Road Initiative. Speaking at a meeting with his Italian counterpart, Wang said that the two countries should treat each other with mutual respect and dialogue on an equal footing. He stated that the Belt and Road Initiative had "borne fruits" for Italy, and that China was willing to promote the "greater development" of the two countries' strategic partnership. Italy has until the end of the year to withdraw from the agreement or see it extended for another five years.

India was well placed to steal a march on China – but it didn’t invest in its human capital

Telegraph

India's failure to invest in human capital has been a major factor in its economic underperformance compared to China, argues Princeton University professor Ashoka Mody in his book India is Broken. Mody argues that India should have followed Japan's model of raising education standards, improving agricultural productivity, and building export-focused manufacturing capability, rather than focusing on large infrastructure projects. He criticises former prime ministers Jawaharlal Nehru and Indira Gandhi for prioritising spending on universities over primary education and for implementing import controls and red tape that created a stifling business environment. Mody points out that China invested more in its people than India, with agricultural reforms, near-universal healthcare, and improved education standards accompanying its economic development. India's failure to invest in human capital is reflected in its low scores on the World Bank's Human Capital index, with China scoring significantly higher. The low rates of female labour force participation in India are also seen as a contributing factor to its economic underperformance.

Despite Xi’s decision not to attend G20 in India, China says bilateral ties are ‘generally stable’

Associated Press

China has announced that Premier Li Qiang will represent the country at this week's Group of 20 (G20) summit in India. Chinese President Xi Jinping's decision not to attend the summit comes amidst frosty relations between China and India, primarily due to a border dispute. Relations between the two countries have also been strained over trade, technology, investment, and India's growing strategic ties with the United States. Despite these tensions, China maintains that relations between the two countries are "generally stable" and that dialogue and communication have been maintained at all levels.

Will assault ship upgrade advance China’s capacity to attack Taiwan?

South China Morning Post

China's most advanced amphibious assault ship, the Type 075 LHD, is expected to be upgraded with an integrated electric propulsion (IEP) system sooner than expected, according to military experts. The Type 075, which is currently nearing completion at a shipyard in Shanghai, is believed to play a key role in a potential attack on Taiwan. The IEP system, similar to the system used on China's Fujian aircraft carrier, would greatly enhance the ship's capacity to launch an air assault. The next iteration of the ship, the Type 076, is expected to be a "drone carrier" with an electromagnetic aircraft catapult and an arresting gear system.

Foreign investors just aren't sold on India

Nikkei Asia

India is struggling to attract foreign capital, despite being seen as a potential alternative to China for global manufacturers. Inbound foreign direct investment (FDI) fell 16.3% to $71bn in the fiscal year ending March 2021, while net FDI declined by 27% to $28bn, largely due to increased repatriation of profits. Vietnam has been the biggest beneficiary of investment from companies looking for an alternative to China. India has tightened screening of inbound Chinese investments, creating additional hurdles for foreign companies looking to set up in the country.

Typhoon Haikui pounds China’s Fujian province, triggering widespread flooding

South China Morning Post

Typhoon Haikui has hit the southeastern province of Fujian in China, causing heavy rainfall, strong winds, and flooding. One crew member from a fire truck was killed after the vehicle was swept into a river, and eight others were rescued. Passenger traffic, including buses and taxis, has been suspended in the affected area, and flight cancellations, train disruptions, and school closures have also occurred. Dozens of shipping routes have been suspended, and this is the second typhoon to hit the province in less than a week. The storm had previously made landfall in Taiwan, injuring dozens of people. The China Meteorological Administration has stated that Haikui has weakened as it moved across southern Guangdong province.

Two arrested after digging hole through Great Wall of China

ABC

Two individuals have been detained in Shanxi province, China, after using an excavator to dig a hole in the Great Wall. The duo confessed to using the digger to create a shortcut in the wall in an attempt to reduce local travel time. The section of the Great Wall affected is said to be a relatively intact area of significant research value. The suspects have been criminally detained and the case is still being investigated.

Chi­na touts ‘Belt and Road’ to Italy amid grow­ing doubts in Rome

Al Jazeera

China's Foreign Minister Wang Yi has stated that the Belt and Road initiative has been successful in Italy, as the country considers leaving the infrastructure project. Wang highlighted the growth in bilateral trade and Italian exports to China over the past five years. Italy is the only G7 nation to have signed onto the Belt and Road Initiative, but there has been growing unease with the agreement. Italian Defence Minister Guido Crosetto has criticised the initiative for doing little to boost Italian exports and flooding the country with Chinese imports. Italy's membership is set to renew in March 2022, unless it requests cancellation by December.

Activist detained in Hong Kong partially won appeal over recognition of overseas same-sex marriage

Associated Press

Hong Kong's top court has ruled that the government's refusal to recognise same-sex marriage registered overseas violates the city's constitutional right to equality. The decision is likely to have a significant impact on the LGBTQ+ community in Hong Kong and could affect the city's reputation as an inclusive place to live and work. The court also ruled that the government is obligated to establish an alternative framework for legal recognition of same-sex partnerships, such as registered civil partnerships or civil unions. Currently, Hong Kong only recognises same-sex marriage for certain purposes such as taxation and civil service benefits.

More than weapons would be riding on Kim Jong-un's train journey to meet Vladimir Putin

The Telegraph

North Korean leader Kim Jong-un is reportedly planning to meet Russian President Vladimir Putin this month, suggesting a deeper alliance is being formed between the two nations. Such collaboration would enable North Korea to break its diplomatic isolation and form a united front against the US, as it seeks greater regional security cooperation with South Korea and Japan. Russia would benefit by replenishing its depleted arms supplies and gaining access to North Korean technology. The situation is causing concern in Washington, Tokyo and Seoul, as they fear what North Korea and Russia could gain from military cooperation.

Taiwan president goes to Eswatini amid pressure from Beijing

Deutsche Welle

Taiwan's President Tsai Ing-wen is visiting Eswatini, Taiwan's only African diplomatic ally, amid heightened tensions with China. Tsai stated that Eswatini has always supported Taiwan, giving them confidence and strength. During her visit, Tsai will attend Eswatini's Independence Day celebrations and meet with King Mswati III. Taiwan has provided significant aid to Eswatini, including antiviral medication to assist the king's recovery from COVID-19. China has been pressuring countries to switch their recognition from Taiwan to Beijing since Tsai's election in 2016, resulting in Taiwan's allies being reduced to 13. China has also increased military activities around Taiwan, reflecting deteriorating relations since Tsai took office.

EU Seizes on Putin and Xi’s G-20 Absence to Engage Africa

Bloomberg

The European Union (EU) plans to use the absence of Chinese President Xi Jinping and Russian President Vladimir Putin from this week's Group of 20 (G20) summit in India to enhance its outreach to nations in the Global South. The EU aims to redefine its partnership with Africa, despite the troubled history of colonialism. The bloc will hold a high-level meeting with African leaders on the sidelines of the G20 summit to demonstrate its commitment. European leaders aim to endorse the African Union's bid for permanent G20 membership and discuss global food security and other issues.

China optimism dissipates after weak data

Reuters

Investor sentiment towards China remains fragile following the release of weak data on Tuesday. China's services activity in August expanded at the slowest pace in eight months, indicating that sluggish demand continues to weigh on the economy. The data, which was in line with the official services PMI released last week, dragged down markets. The MSCI's broadest index of Asia-Pacific shares fell 0.75% and the dollar remained steady. Investor attention is focused on China's largest private property developer, Country Garden, which made interest payments on two U.S. dollar bonds due last month. In other news, the Reserve Bank of Australia kept interest rates steady and the ECB's September meeting is expected to be less likely to result in a rate hike following soft data. Danish drugmaker Novo Nordisk launched its Wegovy weight-loss injections in the UK.

Japan tells WTO Chi­na’s seafood ban over Fukushi­ma wa­ter ‘un­ac­cept­able’

Al Jazeera

Japan has criticized China's ban on Japanese seafood after the release of treated water from the Fukushima nuclear plant. Japan has called the ban "totally unacceptable" and has urged China to repeal the action. Some Japanese officials have suggested that the country may file a complaint with the World Trade Organization (WTO), which the US has said it would support. Japan will explain the safety of the released water at diplomatic forums, including the ASEAN and G20 summits. Japan has also asked China to hold discussions over the import ban based on the provisions of the Regional Comprehensive Economic Partnership (RCEP) trade pact.

Country Garden Makes $22.5 Million Payment, With $15 Billion To Go

NY Times

China's largest property developer, Country Garden, has made a late interest payment, avoiding an immediate default on its debts. The company missed two interest payments last month, totalling $22.5m, on bonds sold in US dollars. Country Garden has been struggling to raise cash to pay off its liabilities, which totalled about $187bn at the end of June. It has agreed to issue new shares at a discount to a creditor owed hundreds of millions of dollars, and has delayed repayment of $537m bonds denominated in yuan for three years.

China's Luckin sells 5.4 mln Moutai alcohol-infused lattes in a day

Reuters

Luckin Coffee, a Chinese coffee chain, has set a new sales record with its alcohol-infused latte. The company sold over 5.42 million cups of the drink on its first day of launch, generating sales of over ¥100m ($13.72m). The latte, made in collaboration with Kweichow Moutai, a Chinese liquor brand, was priced at ¥38 ($5.23), but was discounted to ¥19 on the first day of sales. The latte's alcohol content is less than 0.5% of its volume.

Chinese spy agency suggests that a Biden-Xi meeting hinges on "sincerity"

Reuters

China's top security agency has suggested that a meeting between President Xi Jinping and US President Joe Biden in San Francisco later this year will depend on the US "showing sufficient sincerity". Biden expressed disappointment that Xi was not attending an upcoming summit of G20 leaders in India, but hinted that they would meet. The next likely opportunity for them to hold talks is at an Asia-Pacific Economic Cooperation (APEC) summit in San Francisco in November. China's Ministry of State Security said the US needs to show enough sincerity for the meeting to happen. It criticised the US's dual-natured strategy towards China, saying that China will not let its guard down.

Baidu CEO says more than 70 large AI language models released in China

Reuters

Baidu CEO Robin Li announced that over 70 large artificial intelligence language models with more than 1 billion parameters have been released in China. Baidu recently launched its AI chatbot, Ernie 3.5, which has double the processing speed and 50% improved efficiency compared to the previous version. Li also mentioned that Baidu will be launching a new version of the AI chatbot in the near future.

China’s Largest Export Market Is Now Much Closer to Home

Bloomberg

China's largest export market has shifted from the US and Europe to Southeast Asia. Shipments from China to the Association of Southeast Asian Nations (ASEAN) have reached nearly $600 billion a month, surpassing exports to the US and European Union. This shift is attributed to the Regional Comprehensive Economic Partnership (RCEP), which has helped strengthen trade links between Southeast Asia and China. Additionally, global supply chains have been reworked, with parts sourced from China being assembled in Southeast Asia before being exported to the world. The strong trade linkage between Southeast Asia and China could help stabilize global trade during periods of decreased demand from developed markets. ASEAN's largest export market is also China, where the goods are consumed domestically.

Explainer: Why North Korea's Kim Jong Un may meet with Putin in Russia

Reuters

North Korean leader Kim Jong Un may meet with Russian President Vladimir Putin to discuss potential arms deals, according to a US national security official. The deepening ties between North Korea and Russia come as both countries face off with the US. North Korea has been increasingly reliant on Russia as its isolation over the war in Ukraine grows, while Russia sees value in North Korea. The relationship between the two countries has improved in recent years, with Russia opposing new sanctions on North Korea and both countries promising to deepen defence cooperation.

China’s services activity falls in August to its lowest level in eight months

CNN

China's services sector recorded its lowest level of business activity in eight months in August, according to the Caixin China general services purchasing managers index (PMI). The index fell to 51.8 last month, down from 54.1 in July, indicating a slowdown in business activity and weaker overall new business. Weaker foreign demand for Chinese services was cited as one of the reasons for the decline. The result was in line with official August PMI data released by the National Bureau of Statistics, which also showed slowing demand for services.

ASEAN summit begins as China's new territorial map fuels tensions

Nikkei Asia

Leaders from the Association of Southeast Asian Nations (ASEAN) are meeting in Jakarta to discuss the bloc's response to crises amid escalating US-China tensions and territorial disputes in the South China Sea. President Joko Widodo of Indonesia, the chair of ASEAN, said that future challenges are "getting tougher" but that the association has agreed "to not become a proxy for any power". The bloc is looking to streamline its decision-making process during crises by discussing new rules of procedure.

‘A wake-up call’: Singapore’s US$740 million laundering case exposes loopholes

South China Morning Post

A money laundering investigation in Singapore has exposed loopholes that allowed an alleged crime syndicate to accumulate luxury property, Bentley cars and cryptocurrency. The investigation, which began in August, led to the arrest of 10 foreigners, most of whom were originally from China, on charges of laundering criminal proceeds. The case has raised questions about whether the banking giants that drive Singapore's economy have done enough to block dubious transactions. Singapore has positioned itself as a safe place to park family fortunes, attracting an influx of wealthy individuals from across Asia, particularly China. However, this has also attracted criminals seeking to launder money. The investigation has implicated several major financial institutions, including United Overseas Bank, Citigroup, Oversea-Chinese Banking Corp, Standard Chartered, and DBS Group. While Singapore has a reputation for strict law enforcement, it has experienced a number of financial scandals in recent years.

China’s Xi fights fires at home and abroad

Washington Post

China is facing a myriad of domestic and international crises that are causing its economy to stagnate. President Xi Jinping's tightening grip on power is causing a slowdown in China's growth, and the country's population is both shrinking and aging, leading to questions about the future productivity of its workforce. At the same time, youth unemployment is rising to striking levels and the Chinese government has suspended publishing relevant data. China's once-booming economy is now showing signs of stagnation and the macroeconomic data is pointing to a slow-down. The government cannot repeat the mammoth stimulus projects that were used to power China out of the 2008 global financial crisis. As China's economy slows, the rest of the world is beginning to see China in a different light. The US Commerce Secretary, Gina Raimondo, recently stated that China is becoming "uninvestable" in the eyes of US investors. Recent surveys have also shown that global public opinion is largely negative towards China's influence in international affairs. China's recent actions, such as the publication of a map claiming chunks of territory in neighboring nations, have also fueled tensions in the region.

Chinese Cars Star at Munich Auto Show, Underscoring German Economic Woes

NY Times

German automakers are falling behind in the global electric vehicle race, with some executives using the phrase "China speed" to describe how quickly they need to catch up. Chinese companies are stealing the show at this year's I.A.A. Mobility auto show in Munich, with BYD, an all-electric Chinese carmaker, unveiling new models to applause from the crowd. The show comes at a precarious time for the German auto industry, which has become a drag on the country's economy. Economic output in Germany is stagnating, while prominent German companies have delayed expansion plans or announced plans to build in regions with enticing incentives, such as China and North America. China's ability to produce electric cars quickly is linked to its different approach to the auto business, with companies unafraid of failure. German companies are also concerned about the persistently high price of energy, as well as the high cost of energy and raw materials. German industrial firms are reconsidering previously planned investments, and some German automakers are looking abroad to expand their electric vehicle production capacity.

What happened to the G20’s new world order?

CNN

The upcoming G20 summit in India reflects the splintering of hopes for a global order based on a Western rules-based system. The world is increasingly divided into democratic and autocratic camps, with internal populism and protectionism eroding pushes for free trade. The summit is unlikely to produce any consensus on the war in Ukraine, as Russia and China would likely block it. The absence of Chinese President Xi Jinping from the summit could be seen as a protest or a sign of rising geopolitical angst with India. India, as a member of both the BRICS and the G20, is trying to balance its relationships with both Western and developing nations.

Why This Year’s G-20 Meeting in India May Be a Turbulent Affair

Bloomberg

The Group of 20 (G-20) summit, taking place in India this weekend, is expected to be overshadowed by Russia's war in Ukraine. Leaders from various countries, including the US, UK, and Saudi Arabia, will be attending, while Russia's President Vladimir Putin and China's President Xi Jinping will not be present. The G-20 was founded in 1999 as a forum for finance ministers and central bank governors to discuss economic and financial stability. The group represents 85% of global economic output, 75% of international trade, and two-thirds of the world's population.

Chips, Silk and Paper: You Can’t Keep Secrets Forever

Bloomberg

China's recent development of a chip that matches some of the West's most advanced semiconductors shouldn't come as a surprise, given the country's history of acquiring and spreading technology. Throughout history, Chinese secrets have inevitably leaked through trade, theft, and war. While the progress toward semiconductor parity with the West may alarm US defense experts and proponents of sanctions, it is a reminder that industrial secrets are impossible to keep for long. The article suggests that if China and the US continue to engage in a zero-sum game of world domination, it will ultimately be detrimental for both countries and the world.

China’s big cities vow lofty incentives to entice foreign talent and money

South China Morning Post

Beijing and Shanghai are offering incentives to retain foreign research and development centres amid concerns that the flow of foreign cash and talent into China may slow down. Beijing is offering subsidies of up to CNY50m ($6.9m), residence permits, faster visa processing for top talent, and other incentives to attract and retain foreign R&D centres, while Shanghai is looking to help more foreign R&D centres restructure into local entities. Foreign direct investment in China fell 9.8% to $111.8bn in the first seven months of the year due to cooling China-US relations and geopolitical tensions.

China's 360 to open AI model to the public

Reuters

Chinese tech firms 360 Security Technology and iFLYTEK Co are both opening up their AI models to the public. 360 Security Technology's AI model, Zhinao, will be made available to the public, while iFLYTEK Co has opened its Spark AI model for public use.

US Navy group heading for Yellow Sea in major show of strength off eastern China

South China Morning Post

The US Navy is set to participate in large-scale exercises in the Yellow Sea off the coast of northern China, marking the first such operation in a decade and risking further tensions with Beijing. The move comes after the US recently increased air force activity over the Yellow Sea following a series of North Korean missile launches and amid rising tensions with China. The exercise is seen as a demonstration of the US commitment to deterring China and North Korea, and as a signal of deterrence against China.

China's auto workers bear the brunt of price war as fallout widens

Reuters

Millions of auto workers and suppliers in China are experiencing pay cuts and layoffs as the country's electric vehicle price war forces carmakers to reduce costs. The price war, which was triggered by Tesla, has involved over 40 brands and has led to decreased demand for older models. Some automakers have had to reduce production of both electric vehicles and combustion-engine cars or even shut down factories as a result. The price war is also impacting other areas of the economy as carmakers and auto parts suppliers cut spending on components, electricity bills, and wages. The auto sector is now at risk of becoming a drag on China's economic growth. Despite huge investment in production capacity, domestic demand for cars remains stagnant and household incomes are under pressure. China sold 11.4 million cars domestically in the first seven months of 2023, representing a growth rate of just 1.7%, despite widespread price cuts. Economists warn that China needs to balance its focus on production and supply with attention to demand to avoid inventory overhang and financial stress.

China property support spurs buying but sceptics warn of weak demand

South China Morning Post

Hundreds of families in Beijing and Shanghai signed purchase contracts for property over the weekend after the Chinese government announced measures to support the property sector. The measures include allowing more residents to qualify as "first-time" homebuyers, giving them access to cheaper mortgage loans and lower upfront payments. Aggregate transaction volumes in the primary and secondary markets in Beijing and Shanghai jumped significantly compared to the previous weekend. However, analysts warned that the buying frenzy may be short-lived as many potential buyers were still put off by the bearish economic outlook.

Mainland Chinese companies ‘eye Hong Kong as launch pad’ for overseas expansion

South China Morning Post

A study conducted by the Hong Kong Trade Development Council found that mainland Chinese companies are increasingly looking to use Hong Kong as a launchpad for overseas expansion. The survey, which interviewed 791 companies, revealed that over 90% of respondents planned to increase their business activities abroad in the next three years, with 62.1% wanting to use Hong Kong-based professional services to assist with their expansion. The study also highlighted increased demand for Hong Kong-based services compared to 2019, with a focus on infrastructure, real estate, logistics, and product sales across multiple markets.

Why China’s housing restrictions will share the same fate as its one-child policy

SCMP Opinion

China has cut minimum down payment requirements and lowered mortgage loan rates in an effort to boost its ailing housing sector. The move is aimed at increasing the number of buyers and injecting more money into the market, which is crucial for local government revenues and the national economy. However, it is unlikely that these measures will lead to a fundamental turnaround given China's economic slowdown and ageing population. The government is trying to stimulate demand for houses after years of suppressing it through restrictive policies.

Mercedes CEO Changes Tune on China as ‘Economic Wonder’ Stalls

Bloomberg

The CEO of Mercedes-Benz Group, Ola Källenius, has said that China's luxury car market will not provide the expected opportunities for growth in the short term. He attributed this to China's economic maturity, stating that rapid growth should not be expected. Källenius' comments reflect a broader decline in sentiment towards China's economy, which has been acknowledged by politicians but not widely by the private sector. Mercedes-Benz's revenue in China fell by 9.2% in H1 2021, while sales in the US and Germany increased. Other carmakers have also expressed unease about China's auto market, with Volkswagen CEO Oliver Blume stating that it has not been as strong as expected.

ASEAN leaders seek to assert bloc's relevance at annual summit

Reuters

Leaders from Southeast Asian nations will gather in Jakarta for the annual Association of Southeast Asian Nations (ASEAN) summit amidst divisions within the bloc over the situation in Myanmar and increasing U.S.-China rivalry in the region. The summit will review an ASEAN peace plan for Myanmar, which has seen no progress in resolving the crisis since the military coup in 2021. The lack of progress has exposed internal divisions within ASEAN, which prioritizes unity and non-interference in members' affairs. The summit also comes after China released a map claiming a larger portion of the South China Sea, which has been rejected by ASEAN member states Malaysia, Vietnam, and the Philippines. The summit will be followed by the East Asia summit, where the absence of U.S. President Joe Biden will be notable.

Will belt and road, Asean trade be China’s silver lining amid US de-risking?

South China Morning Post

China's trade with the US and European Union dropped significantly in the first half of the year as Western countries seek to de-risk their supply chains away from China. This decline in trade is due to ongoing geopolitical tensions, weak global demand, and a broad economic slowdown. In response, China has increased diversification efforts, particularly through its Belt and Road Initiative, which aims to enhance China's trade links with the world and expand its global influence. However, analysts warn that this shift will not be enough to offset the losses from declining trade with the West.

Exports to countries along the belt and road plan's trade routes grew by 7.4% in the first seven months of the year, while exports to the European Union dropped by 2.6% and shipments to the US fell by 13%. However, it is unclear whether the belt and road plan exports will be able to "take up the slack" for US and EU exports, as they may be a substitute for direct exports to those markets. China's overall exports have also been weak, falling by 14.5% in July, the largest contraction since the start of the pandemic.

China's trade with the Association of Southeast Asian Nations (ASEAN) has increased, with ASEAN countries now China's largest trading partner. However, analysts warn that most of China's exports to ASEAN members are not destined to stay in ASEAN but are instead intermediate goods for assembly and processing before being sent to China or to the US and Europe for final sale. This means that the increase in trade with ASEAN may not be enough to offset the decline in trade with the West.

Debt Crisis Threatens to Engulf China’s Surviving Developers

Bloomberg

China's housing crisis has resulted in record levels of defaults among the country's private developers, with 34 of the top 50 private developers having already defaulted on offshore debt, according to Bloomberg. The remaining 16, including Country Garden Holdings, face a combined $1.48bn of onshore and offshore bond payments in September. The debt pressure highlights the continued payment risks in the sector, with more defaults expected. The article states that Country Garden is the most at risk of imminent default, with bondholders able to call a default if the company fails to make a $22.5m interest payment by 6 September.

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